Hyundai Motor to raise ₹27,870 cr in India's largest-ever IPO; sets price band at ₹1,865-1,960

Hyundai Motor India, the country's second-largest car maker, has set a price band at ₹1,865-1,960 per share for its highly-anticipated initial public offering (IPO), which will hit Dalal-Street on October 15. At the upper end of the price band, the Indian arm of the South Korean auto major looks to raise ₹27,870 crore at a valuation of ₹1.59 lakh crore. If this IPO becomes successful, this will be India’s largest public issue, surpassing the record ₹20,557 crore raised by the state-owned insurer Life Insurance Corporation (LIC) of India in 2022. Also, this is going to be Hyundai Motor Company’s first IPO outside South Korea and also the first automobile issue in 20 years, after Maruti Suzuki’s listing in 2003.

The three-day IPO of Hyundai Motor India will open for subscription on October 15 and close on October 17, 2024. The allotment of Hyundai Motor shares to eligible applicants is expected to be finalised on October 18, 2024, while the tentative date for listing of the stock on the BSE and NSE is October 22, 2024.

The issue is entirely an offer for sale of 14.22 crore shares by Hyundai Motor India’s South Korean parent. Since the public issue is completely an OFS, the company will not receive any proceeds from the IPO.

The lot size of the IPO is 7 shares and multiple thereafter. So, the minimum application amount for retail investors is ₹13,720 for one lot, while the maximum is 14 lots or 98 shares for ₹192,080.

As per the red herring prospectus (RHP) filed with the market regulator SEBI, the company has reserved half of the issue for qualified institutional buyers (QIBs), 10% for Non-institutional investors (NIIs), and the remaining 35% for retail investors.

Ahead of the launch of the most-awaited IPO of the year, shares of Hyundai Motor India were commanding a grey market premium (GMP) of ₹147 in the unlisted market, indicating the listing price to be around ₹2,107, a premium of 7.5% over the issue price. The GMP has declined significantly from its peak of ₹570 on September 27 amid volatility in the domestic equity market amid escalated geo-political tensions.

“Hyundai India's ₹25,000 crore IPO is poised to be the largest in Indian history, expected to launch this November. The market is abuzz with excitement as Hyundai remains one of the strongest players in the Indian car market, consistently increasing its market share. We can expect Hyundai to receive a higher valuation compared to its peers like Maruti, which currently trades at a Price-to-Earnings (P/E) ratio of 23 for FY25,” says Santosh Meena, Head of Research at Swastika Investmart Ltd.

“Strong demand is anticipated for the IPO, with robust liquidity in the market. However, there are concerns that this could lead to a potential drying up of liquidity in the secondary market. Additionally, the recent buzz in the grey market has slightly tapered off in the past couple of days,” he adds.

Hyundai Motor India is a part of the Hyundai Motor Group, the third largest auto original equipment manufacturer (OEM) in the world based on passenger vehicle sales in CY2023, according to the CRISIL Report. India is Hyundai’s third-largest market followed by the U.S. and South Korea. In 2023, Hyundai Motor India's contribution to Hyundai Motors' global volume stood at 18% as against 14.5-15% four years back.

The company has invested ₹29,741 crore ($5.04 billion) in India operations as of December 31, 2023 in tangible fixed assets and capital work in progress since its inception. As of December 31, 2023, it had 5,475 full-time employees and the largest supply chain outside Korea, which as of March 31, 2024, comprised 194 tier-1 and 1,083 tier-2 suppliers by location in India. Its model line-up consists of cars across different customer segments, including Grand i10 Nios, i20, Aura, Exter, Venue, Verna, Creta, Alcazar, Tucson and the all-electric SUV IONIQ 5.

The auto major has manufacturing plants in Chennai (Tamil Nadu) and Talegaon (Maharashtra). The Chennai manufacturing plant had an annual production capacity of 824,000 units as of March 31, 2024. It reported net profit of ₹4,709 crore and ₹4,383 crore, in FY23 and nine months of FY24, respectively. The revenue from operations stood at ₹60,307.58 crore and ₹52,157.91 crore during the period under review.

The carmaker has hired investment banks such as Kotak Mahindra, Citibank, Morgan Stanley, JP Morgan, and HSBC to manage its IPO.

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